Fundamental events review for Apr 14, 2016

UK Bank of England left interest rates at a record low of 0.5% till next year, mainly due to uneven global growth and low inflation in the nation. This was reported in a survey of 50 economists conducted by Reuters. On average, only 40 percent of the experts forecast that the Bank of England will increase interest rates before the end of this year, down from 45 percent of respondents in the previous survey. Be reminded: the results of Bank of England’s next meeting will be announced today, from which most experts do not expect a change in monetary policy parameters. Representatives of the Bank of England noted at the March meeting that anxiety associated with the referendum was likely to be one of the main causes of the recent fall in the British pound, and expressed concerns that such uncertainty about the future may soon affect the economy. This uncertainty can lead to «lower costs and slow the growth of aggregate demand in the short term,» stated the minutes of the March meeting of the Bank of England. In today’s trading, the British pound is showing a further decline. At the moment, the currency pair GBP/USD is trading around the level of $1.4130. fundamental-ny-j-obzor-14-04-2016 (1) A further drop in the currency pair cannot be ruled out. China In today’s trading, the National Bank of China devaluated the yuan against the dollar. The average exchange rate of the bank has been established at the level of 6.4891 yuan against the dollar, up 300 points from Wednesday’ fixed level, when the rate was 6.4591. Thus, the People’s Bank has carried out the biggest weakening of the yuan since January 7. Against the background of the devaluation of the yuan against the US dollar, experts are saying that the Central Bank of China is deliberately devaluating the national currency to stimulate exports. Premier Li Keqiang, head of the People’s Bank Zhou Xiaochuan and other officials have repeatedly rejected these accusations and voiced assurances that China is opposed to a deliberate reduction in the rate of its currency. Chinese President Xi Jinping in a meeting with US President Barack Obama in Washington also spoke out against a deliberate devaluation of the Chinese currency to boost exports. The People’s Bank of China weakened the yuan’s position against the dollar by more than 1.5% in the first week of 2016. This was the biggest change in the RMB exchange rate since August 2015, when the devaluation of the RMB very was strongly reflected in global stock markets and led to a 5-6% drop in China’s major stock index. After tension on the stock and financial markets aggravated, the Chinese Central Bank directed its efforts to stabilize the yuan. Oil OPEC predicts that global oil demand in 2016 will be lower than previously expected, due to the decrease in consumption, which is accelerating the growth of excess supply in the market. According to an OPEC monthly report released Wednesday, the organization reduced its forecast for growth in world oil demand by 50,000 barrels per day to 1.20 million barrels a day and reported the possibility of a further downward revision. In March, OPEC oil production was 32.25 million barrels per day, up about 15,000 barrels per day from February, said the organization, citing secondary sources. According to the report, if the oil volume produced remains at the level of March, excess supply in 2016 will be 790,000 barrels per day, up from the March estimate of 760,000 barrels per day. Meanwhile, Saudi Oil Minister Ali al-Naimi ruled out a possibility of reducing oil production in the country in his comments to the newspaper al-Hayat published on Wednesday. The largest oil exporters – Saudi Arabia and Russia – agreed on Tuesday to freeze the level of oil production at the forthcoming April 17 meeting of OPEC and non-OPEC countries in Doha, Interfax reported on Tuesday, citing an unnamed diplomatic source in Doha. The representative of the Ministry of Energy confirmed to Reuters that Russian Energy Minister Alexander Novak and Saudi Oil Minister Ali al-Naimi on Tuesday held talks on the potential freeze. Against the background of these events, oil showed uncertainty in yesterday’s trading, and by the end of the American session, oil lost positions gained earlier. At the moment, Brent crude oil futures prices are trading near $43.53 a barrel.

fundamental-ny-j-obzor-14-04-2016 (2)

Of Interest — Exports from China grew for the first time in 9 months. According to the General Customs Administration of China, in March, an 11.5% increase took place, a rate that China has not seen since February last year. Some experts believe that a low base effect and seasonal factors, such as celebrations of the New Year by the lunar calendar in February, were the factors that led to weakened business activity. But other experts see signs of stabilization in the world’s second-largest economy, citing the March numbers. To support this idea, a concurrent reduction of imports in China was less than expected (minus 7.6%), and imports of raw materials such as oil, copper and iron ore increased significantly, which may indicate a revival in industrial activity. — Britain’s biggest retailer Tesco has for the first time in three years seen its UK sales go up. From December to February, i.e. in the fourth quarter of the fiscal year, sales at new supermarkets increased by 0.9%, while the group’s pre-tax profit got ahead of forecasts, amounting to 944 million pounds, which is 1.2 billion euros. Tesco has to restore its reputation after expensive mistakes were found in its 2014 accounting. At the same time, against the backdrop of a fierce price war with its competitors, Tesco had to sell a part of its assets, for instance in South Korea, to reduce staff and generally optimize network performance. — The founder of the world’s most popular social networking site Facebook Mark Zuckerberg in a developer conference in San Francisco presented a platform for writing chat bots for the messenger. These bots will be able to perform basic functions from ordering goods to sending email messages. He also introduced a chat bot for Delivery of bouquets and a CNN bot that compiles selections of only the news that interest the user. Similar features already exist in some other platforms (e.g. Telegram), but analysts believe that, thanks to the development of Facebook, this area of business can significantly accelerate. Facebook messenger has 800 million users and by popularity is second only mobile messenger WhatsApp, which also belongs to Facebook. According to estimates by The Verge, 60 billion messages go through Facebook Messenger and WhatsApp daily, up three times from the amount of text messages.

The analysis above does not constitute direct trading instructions and is of purely informative nature.

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